By Melissa Dakich 

With the current focus on the environment and concerns about global warming, stricter standards for energy conservation and green building design are being adopted by government at the federal, state and municipal levels.  Buildings account for 40% of carbon dioxide emissions according to the U.S. Green Building Council (“USGBC”), so it is only a matter of time before Congress, states and cities step in.  For example, Chicago has enacted a Green Permitting Program using Leadership in Energy and Environmental Design (“LEED”) criteria for commercial construction that reviews design and performance specifications in such areas as site location, water efficiency (for both landscaping and water use reduction), energy and atmosphere, materials and resources, and indoor environment.  While Chicago’s Green Program is not mandatory, it creates quite an incentive to go green by expediting the permit process, providing “cross-departmental coordination” among City departments responsible for reviewing green projects, lowering permit fees and offering significant tax credits. 

Although building green may entail additional up front costs, green buildings use an average of 40% less water and 39% less energy according to the USGBC.  Studies show that a building’s environment can increase the productivity and performance of its occupants as well.  Developers may also find that building green attracts environmentally conscious tenants.  With the growing demand for green space and the higher perceived value of green buildings, even short-term developers are entering the green market.

In addition to impacting building practices, the green movement will also impact business practices in commercial real estate.  Typically due diligence focuses on the financial and environmental health of a particular piece of real estate.  In the not-too-distant future, this due diligence could also require information on a building’s energy consumption and carbon footprint.  Carbon due diligence could become as common as hazardous waste due diligence, according to Michael Gerard, former chairman of the American Bar Association’s 10,000-member Section of Environment, Energy and Resources.  This expanded environmental due diligence could include the potential for carbon credits or tax credits as well as possible higher property valuations for LEED certified properties.  Landlord-tenant negotiations may also require full disclosure of energy information and LEED certification.  And the day may soon come when property owners must reveal a building’s energy costs when applying for a loan or refinancing.  

The green building trend is gaining momentum.  Forward-thinking developers and their attorneys can ride this green wave as long as they are aware of the issues that may not otherwise arise in ordinary development projects.